European Stocks Advance on U.S. Non-Farm Payroll Report
European stocks advanced, rebounding after the Stoxx Europe 600 Index fell to its lowest level in more than six weeks yesterday, as a U.S. report showed employers added more workers last month than forecast.
Severn Trent Plc rallied 2.5 percent after a consortium of investors raised their takeover offer for the U.K. utility. Elan Corp. gained 5.3 percent after Royalty Pharma increased its offer to buy the Irish drugmaker. Royal KPN NV jumped 6 percent after Sanford C. Bernstein & Co. raised its rating on the stock. Ipsen (IPN) SA rose 2.1 percent after Goldman Sachs Group Inc. advised buying the shares.
The Stoxx 600 climbed 1.3 percent to 295.4 at the close of trading. The benchmark gauge still fell 1.8 percent this week, its biggest weekly drop since April, amid growing speculation the Federal Reserve will scale back monetary stimulus measures as soon as September.
“A really weak number, say below 90,000, would have been very bad for equities,” said Andreas Nigg, head of equity and commodity strategy at Vontobel Asset Management in Zurich. “A really good number above 250,000 would also have been bad as that would’ve been more fuel for those looking for the Fed to exit. So, a number slightly better than expected is probably the best we could have hoped for in these uncertain times.”
Payrolls in the world’s biggest economy rose 175,000 in May after a revised 149,000 increase in April that was smaller than first estimated, a report from the Labour Department showed. The median forecast in a Bloomberg survey called for a 163,000 gain last month. The unemployment rate rose to 7.6 percent from a four-year low of 7.5 percent as more Americans entered the labour force.
Fed Chairman Ben S. Bernanke in May suggested the central bank could curtail its bond buying if the job market improves in a “real and sustainable way.”
In Germany, the Bundesbank cut its forecasts for growth in Europe’s largest economy for this year and next. The Frankfurt-based central bank reduced its 2013 growth projection to 0.3 percent from the 0.4 percent predicted in December, and said the economy would expand by 1.5 percent in 2014, compared with the previous estimate of 1.9 percent.
Severn Trent rallied 2.5 percent to 2,070 pence in London after a consortium of investors including Kuwait Investment Office, Borealis Infrastructure Management Inc. and Britain’s Universities Superannuation Scheme raised their offer for the U.K. utility to 5.3 billion pounds ($8.22 billion).
Elan gained 5.3 percent to 9.97 euros in Dublin after Royalty Pharma increased its offer to buy the Irish drugmaker by 5 percent to $6.7 billion. The all-cash bid of $13 per American depositary receipt is higher than a previous bid of $12.50 and compares with the $12.68 closing price on June 6.
KPN rallied 6 percent to 1.55 euros. Sanford Bernstein raised its recommendation on the Dutch phone operator partly owned by Carlos Slim’s America Movil SAB to outperform from market perform, meaning investors should buy the shares.
Ipsen rose 2.1 percent to 27.60 euros after Goldman Sachs upgraded its rating on the French drugmaker to buy from neutral, citing a turning point in its transition to growth.
Belgacom SA added 2.9 percent to 17.44 euros. Morgan Stanley raised the stock to equal weight from underweight, saying the stock has fallen 30 percent from its peak last year and that even if it cut its dividend by about 31 percent, it would still yield 9 percent.
Bellway Plc (BWY) advanced 1.4 percent to 1,334 pence after the U.K. homebuilder said reservations in the past four months rose 31 percent from a year earlier as the government’s Help to Buy initiative gave customers greater access to mortgages.
Elekta AB (EKTAB) fell 3.8 percent to 102.80 kronor, posting the worst performance on the equity gauge. Bank of America Corp.’s Merrill Lynch cut its rating of the Swedish manufacturer of radiation-surgery equipment to underperform from neutral, meaning investors should sell the stock. BofAML said profit could be disappointing because of research spending and pricing pressure.
Hochtief AG (HOT) declined 2 percent to 50.58 euros. Berenberg Bank AG reduced its recommendation on Germany’s biggest builder to hold from buy, citing a worsening outlook for Australian construction and mining.
Lanxess AG, which makes specialty chemicals, plastics and rubber used in car tires, dropped 1.5 percent to 55.89 euros. European chemical shares may face cyclical pressures in the second half of the year as low consumer confidence depresses volume and margins, JPMorgan Chase & Co. said in a note.
National benchmark indexes gained in 16 of the 18 western-European markets today. France’s CAC 40 added 1.5 percent, Germany’s DAX climbed 1.9 percent and the U.K.’s FTSE 100 rose 1.2 percent.
The volume of shares changing hands in Stoxx 600 companies was 11 percent greater than the average of the last 30 days, according to data compiled by Bloomberg.
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